The quarter also saw office vacancies shrinking and firms taking a proactive approach to review expansion and relocation options to lock in rents before they rise further.
Asia Square Tower 2, which received Temporary Occupation Permit (TOP) last September, has seen a string of leasing deals lately, resulting in over 200,000 square feet of space being committed in the past six months, said the development's head of leasing, Luke Moffat.
Besides the high-profile leases inked with Mizuho and Westpac, which have signed up for 105,000 sq ft and 38,000 sq ft respectively, other new tenants include Mercuria Energy Trading (21,000 sq ft), Scor RE (20,000 sq ft), Nikko Asset Management (17,000 sq ft) and Los Angeles-based private equity group Platinum Equity Partners (4,000 sq ft), which is making its maiden entry into Singapore.
Currently, 60 per cent of the 780,000 sq ft of offices in Tower 2 has been leased.
The occupancy rate for Tower 1, with 1.26 million sq ft of offices, stands at 90 per cent.
Recent leasing deals in Tower 2 have been at monthly rental rates in the low to mid-teens, with smaller deals of less than half a floor inked in the mid-teens and higher, said Mr Moffat.
Six whole floors (typically a floor has about 30,000 sq ft) in Tower 2 are still available. In Tower 1, which was completed in mid-2011, three floors (of about 35,000 sq ft each) are left. The monthly asking rent for either tower is now $18 psf.
Colliers International, in a report issued yesterday, said that the average monthly gross rent for Premium Grade offices in the Raffles Place/New Downtown area rose 3.6 per cent quarter on quarter to $10.67 per square foot (psf) in the first quarter of this year, hot on the heels of a 3.8 per cent hike in the fourth quarter of last year. The property consultancy group forecasts a full-year 2014 increase of up to 15 per cent.
As for Grade A space in the same Raffles Place/New Downtown micro-market, the average monthly rent rose 5 per cent quarter on quarter to $9.73 psf in Q1 - a much bigger increase than the 1.4 per cent increase in Q4 2013.
Suburban Grade A rents rose 5.7 per cent to $4.85 psf in Q1, after inching up 0.4 per cent in Q4.
Supported by healthy leasing interest, the average occupancy rate of Premium Grade office space in Raffles Place/New Downtown shot up by 6.3 percentage points quarter on quarter to 93.8 per cent in Q1 2014 - the highest level since Colliers began tracking the series in Q4 2011.
The jump was on the back of strong interest in Asia Square Tower 2, said Chia Siew Chuin, director, research and advisory, at Colliers.
The firm's executive director of office services, Marcus Loo, said: "As the global markets improve with returning business confidence in recent years, we see companies positioning themselves to take advantage of the growth in Asia, which was already evidenced by the successful office take-up by Allianz and Mizuho (both at Asia Square Tower 2), the largest CBD leasing transactions in 2012 and 2013, respectively."
Looking ahead, Colliers noted that with global economic conditions likely to continue to improve for the rest of this year, and as Asia continues to offer greater growth opportunities compared with mature markets in Europe and North America, more foreign companies - such as those in the trading, brokerage and e-commerce industries - have recently opened or are looking to open a new office in Singapore to ride on the global recovery wave.
Mr Loo added: "The first quarter of the year saw numerous Requests for Proposal (RFPs) by firms from the insurance, commodities, and information and communications-related industries seeking to explore different leasing options ahead of their respective lease expiry. These RFPs could potentially translate to more office leasing deals being inked in the next six to 12 months."
Ms Chia expects the healthy demand to underpin a landlord's market in the Premium Grade and Grade A office segment for 2014 - given that many of these buildings are already enjoying relatively high occupancy levels of above 90 per cent.
Moreover, the pipeline for new Premium Grade and Grade A office supply for the rest of this year and 2015 remains limited with only two major CBD projects slated for completion - CapitaGreen and South Beach.
Consequently, rents are poised to continue their uptrend in 2014, but forecast to be capped at 15 per cent for Premium Grade and Grade A office space in Raffles Place/New Downtown - taking into consideration risks that could destabilise the global economic recovery and the increasing cost of doing business locally.
Meanwhile, with tenants carrying out their planned upgrades to newer buildings, there could be vacancy pressure for buildings of lower specifications. Hence, the average rental growth for Grade B office space is expected to be limited to 10 per cent in 2014, said Colliers.
Source: Business Times, 20 Mar 2014